My business lost a major contract, so I cut the headcount of my company in half. It wasn’t a good start to that year.

Even after the cuts, I thought we might not make it.

I made some quick changes, and the opposite happened – we were more profitable and started to grow faster than before. Here’s why:

The contract we lost was almost half our monthly revenue. Everyone in the company knew, and gave them ‘all hands on deck’ service. Even when that customer made unreasonable demands: insane deadlines, pulling me in, second-guessing the team, and renegotiating price down every quarter.

Then they had a management change. New management had “their guys” that they brought in. It happens a lot (and you should plan for it, if you’re a vendor). But I wasn’t as prepared as I should be.

And just like that, we were out. They didn’t have the courtesy of even calling me, let alone a meeting. They sent a breakup email.

I’m sitting there stunned reading the three-sentence message. Wondering what the (BLEEP!) I’m going to tell the team whose livelihoods depended on this account.

I had no idea this would be the best thing for the company in the long run.

We helped team members we let go find new positions as best we could. That cut the company down to breakeven. We weren’t losing money – but not making any, either.

Yay, no salary for me (again).

Next – figuring out how to support our remaining clients with a demoralized team. That was trickier, because they all had lost friends to the layoff. Each one was wondering if the company would survive, or whether they would be next.

The key to solving it?

Doubling down on process.

We’d spent so much time delivering for the Big Client (and their unreasonable, out of left field demands) that we spent no time making delivery better. We realized that we’d been ignoring some far more profitable smaller accounts.

And I asked a critical question – how could we revise everything to support far more smaller, but more profitable, customers? (Have you analyzed your customer base?)

We made a two month plan to refactor how we delivered. I doubled down on marketing and sales – which I could do, now that I wasn’t being pulled into delivery.

Do you know what we found in just a couple of weeks?

That we could deliver for clients with 20% fewer labor hours, and more reliable results, with better process.

It just required that we take the time to do things differently. Time we didn’t have with the Big Bad Client monopolizing every spare hour. We went to work doing what we should have all along:

  • Document the process (the right way)
  • Communicate differently, both internally and with customers
  • Lean on automation more to reduce manual labor on the team and increase reliability of delivery for the customer
  • Analyze who should be doing what

The 20% decrease in workload let us take on new clients. Which drove higher profitability.

Within seven months we were more profitable than before. AND I wasn’t pulled into anything. AND the team wasn’t second-guessed by a bully client.

This was early in my career. I came up with some rules that I’ve held to since:

  • The first is never let a single customer become a material part of revenue.
  • The second is the point of this article – don’t scale before you’ve optimized delivery, because-

Stuff’s gonna break
Your team’s gonna break
The company’s gonna break
You’re gonna break

OK, so how do you apply this in your company? It depends on what you’re delivering, your labor mix, and a few other important factors. The important part isn’t what I did, in my situation with my team and my customers.

The point is the thought process you go through to fix the problem.

Step back to first principles: is a small number of customers risking your company’s revenue? Are they preventing you from doing a better job for higher-margin customers?

Start by asking those questions – and go from there.

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